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Tract of land for plantation management

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Reference no: EM131142852

You are looking to buy a tract of land for plantation management. You find two available pieces of land in the region. All thinnings will produce pulpwood. Use the following information to answer the questions.

Tract #1

Current age of Rotation: 27 years

Planting Costs: $125/acre

Tax and Management Fees: $8/ac/yr

Thinning Volume (age 18): 51.38 tons/acre

Thinning Volume (age 25): 96.3 tons/acre

Thinning Cost (age 18 & 25): $300/acre

Final Harvest Volume (age 35): 29.8 MBF/acre

Final Harvest Cost: $600/acre

Time of Harvest Pulp Price: $16/ton

Time of Harvest Sawtimber price: $448/MBF

Discount Rate: 8%

Total Acreage: 850 acres

Listing Price: $6,325,000

Tract #2

Current age of Rotation: 29 years

Planting Costs: $85/acre

Tax and Management Fees: $7/ac/yr

Thinning Volume (age 18): 22.67 tons/ac

Thinning Volume (age 25): 80 tons/ac

Thinning Cost (age 18 & 25): $400/ac

Final Harvest Volume (age 35): 32.5 MBF/ac

Final Harvest Cost: $350/acre

Time of Harvest Pulp Price: $12/ton

Time of Harvest Sawtimber Price: $478/MBF

Discount Rate: 8%

Total Acreage: 700 acres

Listing Price: $6,700,000

A) Which tract has a higher land value? Why?

B) Which piece of land is the better deal? Why? (Hint: Consider the standing timber in addition to the land to evaulate the seller's estimation of value)

C) Which piece of land would you buy and why?

Reference no: EM131142852

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